As the recovery kicks in, you want your business to be ready. You’ve likely already made tough choices on whether, where, and how much to cut back. You may be in round two (or three or four) of the where-can-we-cut-more fight.
What about the cost of “looking good”? It counts, because appearance influences many factors, including a customer’s or prospect’s impression of your business, employee morale and your ability to attract and retain the right team, and your lender’s and your vendor’s decision on creditworthiness.
When you make your decision on cutting expenses, consider which of the looking-good costs are more ego-driven than customer- or employee-focused. Here are some tips for choosing which costs to cut now and which to continue.
Cut things your customers or prospects won’t see. Consider reducing the frequency of an internal newsletter. You might delay replacing office equipment. Some companies have successfully collaborated with underutilized employees to cover activities — such as office cleaning — that are usually contracted out. Perhaps the office holiday party is at the president’s home instead of a nice hotel.
Cut costs for employee benefits with a clear understanding of reinstatement. Your employees are probably happy to have a job in this economy. When the economy improves, however, they’ll remember if you were fair or not. Yes, you have license in a downturn to ask everyone to share the pain — but I recommend that you indicate either the duration of employee cuts or the circumstances under which you’ll be able to restore the benefits. Then keep your promise.
Make strategic reductions in marketing costs. Pre-recession, my company sent fliers out to all branches of the financial institutions in our geographic market for our “Tax-Return Analysis in a Tough Lending Environment” training. One mailing was sent six weeks in advance and a second three weeks in advance. Here are steps the bank consulting and training division of my company took after the recession to reduce marketing costs.
- It dropped the branches but continued to mail to all of the decision makers.
- It continued to send two fliers to the list of customers but only one to the prospects.
- The division marketed through local bank and credit union chapters to offer a discount for its members and revenue-sharing to the chapters.
When it’s a good idea to show off. If your numbers were down in 2008 and 2009, you may be just under your lender’s requirements to qualify for cash flow, liquidity, or debt coverage. Don’t assume that your good business decisions will be obvious to the lender. Make sure they’re noticed by doing the following.
- Share the strategy you used to conserve cash and capital.
- Highlight ways you cut costs without damaging your brand, your credibility, or your reputation. Demonstrate that you were (and are) willing and able to reduce your personal compensation and benefits to keep your business recovery-ready.
Linda Keith is a certified public accountant who provides consulting and training for financial institutions and is a frequent presenter at business and banking conferences. Learn more at LindaKeithCPA.